The competitiveness of the EU, in a very uncertain geopolitical context and a flourishing rivalry between the main world powers, is the backbone of this week’s EU negotiations. It started with the Eurogroup declaration, which called on Monday for a mobilization of private capital to strengthen the competitiveness of the bloc, to use public funds as investment catalysts in certain sectors and to coordination of industrial policies to avoid further fragmentation of the single market.
“Effective ways of catalyzing and mobilizing private capital must be explored at national and European levels, including through the participation of the European Investment Bank,” underline the Twenty in their joint declaration this Monday. Although private investment is vital, public financing also plays an important role. “Public funds are scarce and will be better used as catalysts to mobilize private capital in areas with positive benefits.
The Eurozone Ministers of Economy and Finance called for the mobilization of private capital to strengthen the competitiveness of the Eurozone, while considering that at present, governments are called upon to consolidate their public finances . In this sense, the declaration considers “essential” and ““It is urgent” to advance the Capital Markets Union for private financing to be mobilized in the EU and, therefore, urges the European Commission to present a proposal that allows progress.
However, the Eurogroup calls for avoid “generalized” industrial policies at the national level to avoid its repercussions on increased fragmentation of the single market. Instead, he advocates coordination at the Community level and emphasizes that, in specific cases, “industrial policy can be used to address market failures and improve our resilience and open strategic autonomy. However, it must be carefully designed, combined with appropriate framework conditions for businesses and properly implemented to avoid risks, such as trade distortions.
Ministers emphasize that the National industrial policies “should be limited in scope”be forward-looking, create a favorable business environment to stimulate investment and focus more on technologies and sectors than on companies. ” That is to say, a series of conditions which advocate coordination at European rather than national level and which prevent aid that certain Member States with greater budgetary power can contribute to the fragmentation of the single market.
The Eurogroup statement highlights the challenges that remain for Eurozone countries: “low growth, stagnant productivity, insufficient levels of innovation and demographic challenge. » For these reasons, he considers it “imperative” and “urgent” to remedy the lagging performance of the economy by “increasing its productivity” and “strengthening competitiveness” through reforms and investments.
In their declaration, the Twenty bring together the recommendations of the two former Italian prime ministers, Enrico Letta and Mario Draghi in their respective reports to strengthen the competitiveness of the EU. Eurogroup negotiations since last October have revolved around energy prices, commercial fragmentation, productivity gap, the lack of innovation, the role of industrial policy or the lack of funding in the EU for strategic projects.
Eurozone economic leaders considered it a “priority to address Europe’s poor productivity performance by improving the conditions enabling businesses to invest and innovate. They attribute this lack of productivity in the EU to the lack of an innovative ecosystem, which has led to a lag in high value-added sectors, such as telecommunications technologies and digital industries.
In addition, they consider it necessary to stimulate investment in research and development in order to encourage private sector participation. To this end, they propose to improve investment conditions, carry out structural reforms and improve coordination public funding also at European level.
In this sense, they also propose that venture capital be mobilized to finance startups and scaleups, which requires proper functioning and greater integration of the capital market. All this would help channel savings and investments both within the EU and from third countries.
In line with some of the recommendations already made by Letta and Draghi, the Eurogroup considered it essential to promote the training and retraining of professionals in the EU to avoid labor shortages. It would, in turn, be complemented by a more flexible labor market, EU labor mobility and policies that attract and retain talent. “Attracting foreign talent is also crucial to mitigating the consequences of the aging population,” notes the press release.
The effects of high energy prices on the bloc’s competitiveness is another point raised by the Eurogroup. “Good planning for the green transition and security energy are not only complementary imperatives, but can also provide economies with opportunities to increase their productivity,” they say.
Beyond the implementation of more renewable capacities, these are investments aimed at responding to greater flexibility of demand, storage infrastructure or more interconnections. This is why they recommend having a strategy at community level, complementary to the national strategy, to promote electrification and interconnections, particularly between countries, which would lead to a drop in prices. “This would reduce budgetary pressure by reducing the need for energy aid and would support economic growth while reducing costs for businesses and households.
“The productivity gap has widened between the EU and its trading partners, such as the United States, while emerging economies, such as China, continue to generate competitive pressure,” say the economy ministers of the euro zone.
